A pawn loan is a short-term, secured loan that you make by offering an item of value as collateral. The pawnbroker will appraise the item and offer you an amount based on its resale value. Typically, you’ll have 30-60 days to repay the loan (plus fees and interest), or else the pawnshop will sell it to cover its costs.

No credit check or income verification is needed to get a pawn loan, which can be appealing to people who don’t qualify for mainstream loans or want to avoid the hassle of applying for a payday loan or title loan. However, a pawn shop loan is expensive and can have lasting consequences if you aren’t able to repay in time.

How a Pawn Loan Works and When to Use One

Pawn shops charge monthly interest rates that can be significantly higher than personal loan interest rates and credit card rates. For example, a $100 loan with a 20% monthly rate becomes $240 over a year.

The average pawnshop loan size is $150, but you could borrow much more than that by finding an item the pawnbroker considers valuable. Popular items include jewelry, electronics, firearms and musical instruments.

While a pawnshop loan can be helpful in an emergency, it’s important to weigh the pros and cons before you borrow. A personal loan is a better option for most borrowers, and you can apply online in minutes. Plus, if you’re approved, your loan payments are reported to the credit reporting bureaus and on-time repayment can help you build a positive credit profile.